Transfer Pricing Alert

Amendments to Transfer Pricing Bylaws

2 min read

On 20 March 2023, the Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia has approved amendments to the Transfer Pricing (TP) Bylaws. These amendments will bring the following into effect:

Extend applicability of TP Bylaws to Zakat payers; and
Introduce Advance Pricing Agreements (APA) provisions for Tax and Zakat payers.

The amended TP Bylaws and APA provisions will be applicable for financial years (FY) starting on or after 1 January 2024.

Compliance requirements

All Zakat payers will be required to disclose their related party transactions in a TP Disclosure Form and submit an Affidavit along with their Zakat declarations. They will also be required to prepare additional documentation (Local File including benchmarking and Master File) subject to the following thresholds:

Phase 1: Starting FY 2024 till FY 2026

Value of transactions with related parties	Disclosure Form and Affidavit	Additional documentation
SAR 48 million and less	Mandatory	Not applicable
Between SAR 48 million and SAR 100 million	Mandatory	Optional
SAR 100 million and above	Mandatory	Mandatory

Financing funds are excluded from Phase 1, but included in Phase 2.

Phase 2: FY 2027 onward

Value of transactions with related parties	Disclosure Form and Affidavit	Additional documentation
SAR 48 million and less	Mandatory	Not applicable
SAR 100 million and above	Mandatory	Mandatory

Next steps

TP is a hot topic in the global tax environment. Significant tax disputes in Saudi Arabia and globally are focusing on related party transactions. Thus, introducing TP Regulations for all Tax and Zakat payers should limit their exposure by applying the international accepted TP rules. The introduction of an APA program also offers additional certainty on the treatment of relevant related party transactions.

At this stage, Zakat paying companies should look at their business arrangements from a TP perspective and consider the impact it will have on its arrangements with related parties.

ZATCA did not yet publish the amended version of the TP Bylaws and or any updated Guidelines.

TP has been a hot topic in the global tax environment. Significant tax disputes in KSA and globally are focusing on related party transactions. Thus, introducing TP Regulations for all Tax and Zakat payers should limit their exposure by applying the international accepted TP rules. The introduction of an APA program also offers additional certainty on the treatment of relevant related party transactions.

At this stage, Zakat paying Companies should look at their business arrangements from a TP perspective and consider the impact it will have on its arrangements with related parties.